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performed substantial services essential to petitioner, and the
amounts of personal expenses paid on his behalf were
compensation. Such compensation constitutes wages for purposes
of FICA and FUTA taxes. Accordingly, we hold that petitioner is
liable for the related FICA and FUTA taxes on the amounts deemed
wages to Mr. Henderson.
Respondent contends that petitioner is liable for the
addition to tax imposed by section 6656 for failure to make
timely deposits of taxes with respect to both 1995 and 1996.
Section 6656(a) imposes an addition to tax for failure to timely
deposit any required tax in a Government depository, unless it is
shown that such failure is due to reasonable cause and not due to
willful neglect. The addition to tax is equal to the applicable
percentage of the amount of the underpayment. Sec. 6656(a). The
applicable percentage is 10 percent if the failure to deposit is
more than 15 days. Sec. 6656(b)(1)(A)(iii).
Petitioner did not address the section 6656 failure to
deposit additions to tax at trial. Petitioner presented no
evidence to establish reasonable cause for its failure to deposit
the required FICA and FUTA taxes. Accordingly, we hold that,
with respect to the deemed wages to Mr. Henderson, petitioner is
liable for the section 6656 additions to tax with respect to the
FICA and FUTA tax liabilities for both years in issue.
Finally, we must decide whether petitioner is liable for the
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